Hot Investment Themes 2024: iShares Sets Sights on Harnessing Innovation and Opportunity

In the ever-evolving realm of AI investments, predicting the prevailing theme is hardly a groundbreaking endeavor. However, the nuanced approach investors are poised to take in the upcoming year might just be the unexpected twist. The relentless pace of AI development means every technological leap gives rise to a fresh array of investment prospects. iShares doesn’t just anticipate a broader adoption of AI across diverse sectors. It also envisions a transition towards multi-modal AI – systems capable of deciphering and comprehending a wider spectrum of data types beyond mere text.

With the theme gaining traction in recent times, the low-hanging fruit has already been plucked. As the potency of AI intensifies, it becomes sensible to broaden one’s horizons beyond the conventional focus on graphics processing units (GPUs). Substantial gains may arrive for other hardware manufacturers. These include those producing central processing units (CPUs), application-specific integrated circuits (ASICs), power-management chips, high-performance solid-state drives (SSDs), and networking hardware.

The “Magnificent Seven”

The “Magnificent Seven” of 2023, boasting an impressive average return of 108%, outshone the NYSE FactSet Global Robotics And AI Index, which managed a modest 32%. Nevertheless, the gap presents an opportunity for investors to identify companies that exceed expectations or, at the very least, exhibit above-average potential at reasonable valuations. iShares remains vigilant about companies focusing on enterprise and product adoption, multi-modal advancements, and the burgeoning hardware sector. Remarkably, iShares contends that smaller and mid-sized companies may offer the most lucrative returns.

For those seeking diversification within the AI theme, Finimize  suggests looking at the BlackRock Future U.S. Themes ETF (ticker: BTHM; expense ratio: 0.6%), the iShares Robotics and Artificial Intelligence Multisector ETF (IRBO; 0.47%), the Global X Artificial Intelligence & Technology (AIQ; 0.68%), or the WisdomTree Artificial Intelligence UCITS ETF (WTAI; 0.4%) are viable options worth considering.

The once-cherished ideal of harmonious global collaboration has faced unprecedented challenges in recent years. It has been battered by the seismic disruptions of the COVID-19 pandemic, geopolitical flashpoints like the conflicts in Ukraine and Gaza, and ideological and environmental shifts that have deepened global divides. In response to these threats, governments and businesses worldwide are reassessing their reliance on external sources. They are seeking to fortify internal capabilities and cultivate partnerships with trusted allies.

This strategic recalibration has manifested in a significant shift of production towards higher-cost economies. As a result, the elevated production costs in these regions have rippled through the global economy. They have had an impact on the pricing of goods traditionally manufactured in low-cost factories, often found in Asia. While this dynamic presents challenges for established players, iShares identifies it as an opportunity for new entrants to seize the mantle of global economic leadership. The firm envisions a new era of economic diversification, where emerging markets and innovative companies across the globe will reshape the global landscape.

Investing Opportunities

Mexico, with its proximity to the United States, offers a compelling option for companies. The country has lower labor costs than its northern neighbour and a free-trade environment under the USMCA. Despite the recent shift of manufacturing jobs to the country, Mexican stocks remain surprisingly undervalued compared to historical averages. They trade at a discount to broader emerging markets.

India, the world’s fifth-largest economy, may become a manufacturing powerhouse and the third-largest economy globally by 2030. This potential has attracted investor interest, with over $2 billion flowing into Indian ETFs this year. Investing in emerging market (EM) assets requires a nuanced approach. People should recognize the diverse impact of global changes across the EM landscape.

A selective approach is essential for success, focusing on countries like India and Mexico that are well-positioned to benefit from shifting global dynamics. ETFs like the iShares MSCI India ETF (INDA; 0.64%), iShares MSCI Mexico ETF (EWW; 0.5%), and Lyxor MSCI Emerging Markets Ex China UCITS ETF (EMXC; 0.5%) offer a convenient way to capitalize on these opportunities.

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